ABC television has revealed the contents of a leaked government document which showed immigration officials believed Ms Rau was an Australian citizen almost three months before she was released from immigration detention.
The Immigration Department memo reportedly warned in November last year that Ms Rau was likely to be an Australian citizen.
Opposition immigration spokesman Laurie Ferguson said both Senator Vanstone and department secretary Bill Farmer should be dismissed.
"The Prime Minister has to seriously consider the situation the minister now (faces)," Mr Ferguson told ABC radio.
"She should be actually kicked out.
"I had a degree of reluctance to push in regards to Amanda originally because most of the events in the department have been covered over the period when there was another minister.
"I thought there was a great degree of responsibility there.
"But after this revelation (it's difficult) to say there's not a fundamental problem at the top."
Mr Ferguson said the problem in DIMIA had become so serious Mr Farmer's position was no longer "tenable".
Meanwhile, an academic assisting the Rau family in its submission to the Palmer inquiry, Newcastle University associate professor of law Ray Watterson, says the memo is a bombshell that will assist in Ms Rau's compensation claim.
Wilcox in the SMH
"The sort of message we've been getting so far from Minister Vanstone and others is that, despite (Ms Rau's) mental illness, she was devious and misleading the government and DIMIA officials about her identity, and because of that they were unable to get to the bottom of things," he said.
"I'm afraid this (memo) gives the lie to that proposition that's been put about."
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